IT Spending: the Start of a Shift?

April 25, 2013 Krzysztof Piskorski

Aristotle Onassis claimed that the secret to successful business is to know something others don’t know (and his business proved to be quite successful after all). That’s the main reason why research papers and business surveys are always an important focus for us. Today, we bring you some fresh and interesting data regarding IT spending predictions for major Western companies.

The data itself comes from Barclays Research that has recently asked around 100 successful CIOs a series of questions. One of those questions was especially interesting for outsourcing companies like PGS Software – CIOs were asked what they were going to spend their IT budgets on in 2013.

Here’s the result, coupled with a previous survey from September 2012 for comparison’s sake.

IT Spending According To Barclays Research

Buzzwords that don’t buzz anymore

One important thing to notice is that both Big Data-related investment plans and Cloud Computing adoption rate have declined slightly since the last survey. The decline is notable, considering that Big Data market is supposed to be one of the main growth vectors of the entire IT sector in the upcoming years.

Still, both spending categories occupy a prime place in the minds of the information technology leaders. Just like our article predicted some time ago, almost a fifth of the queried CIOs realize that managing and interconnecting their huge datasets might bring a lot of additional value to their companies. And last year proved that the Big Data problem is getting more urgent than ever. According to this Wired story, in 2012 we collectively generated 2.8 zettabytes of information, the bulk of which comes in the form of business e-mails, social content, various databases and indexes.

So, why the decline in Big Data plans? The answer is simple: we’re witnessing an end to yet another tech media fad. The recent public interest in Big Data and Cloud Computing was mostly fueled by press and online publications. It peaked, at least for now, but strong business interest still remains.

Virtualization – a breakout trend

So, we know which spending trends are weakening. But where’s the growth? One look at the chart shows two spending categories that have expanded most since 2012: server virtualization and storage virtualization. Server virtualization is an especially hot topic – the number of companies planning to spend big in this area doubled in just a few months!

You might be surprised, as virtualization is essentially nothing new. But hold on, there’s a good reason for many businesses to be interested in IT today. It can be summarized in just two words: technology improvements. Last year brought us many new products that make virtualizing business-critical applications easier and more risk-free than ever before. VMware released an updated 5.1 version of vSphere, Microsoft launched virtualization-friendly Windows Server 2012, and there was an influx of virtualization-based startups, third party services and monitoring metrics.

There are also many businesses that successfully dipped their toes in virtualization by moving their low priority applications to server clouds in recent years. Now they seem to be ready to move critical services as well.

No wonder that virtualizing core applications brings several advantages, as outlined in this paper by vmware:

  • Consolidation – virtualizing your core systems reduces the hardware overhead. Some companies needed 50% less physical hardware after they moved all services to virtual servers.
  • Dynamic scalability – new servers are created faster by cloning, it’s easier to scale up certain services.
  • Optimal availability – virtualized environments are better guarded against host and hardware failures.
  • Disaster recovery – automatic recovery and easier remote access work in favor of virtualized solutions.
  • Enhanced management – virtualization often allows to reduce complexity of the IT infrastructure and makes it more transparent.

And just to drive the point about virtualization further – here’s the result of the IDC survey that asked hundreds of system administrators a simple question: what percentage of your workload currently runs on virtualized hardware, and what will that percentage be 12 months from now?

Server Virtualization Survery

Within a year, 41% of queried admins plan to virtualize over 75% of their workload. That’s a big move.

Other points

The thing that doesn’t even register on Barclays chart is mobile. It seems that big businesses are not that much interested in spending on the mobile part of their business model – either they already have the necessary apps and workplace solutions, or they don’t want them. Of course, things might be completely different for medium and small companies, as they are always a bit further back the technology adoption curve.

What’s a bit more worrying is a drop in the planned security spending. While many companies might think that after years of security audits and investments they are safe, that’s not the case. Recent data, like the Symantec Internet Security Threat Report Volume 18, shows a 42% increase in online targeted attacks (mostly aimed against medium businesses) and 30% increase in Web-based attacks. There’s also a worrying increase in both iOS and Android malware, which might be one of the things that turns CIO’s away from mobile solutions.

PGS Software remains committed to offer its clients systems and applications that adhere to the strictest security standards. Unfortunately, not every company out there thinks the same, and growing botnets and large number of infected systems are now a threat to everyone. If anything, businesses should think about security more than ever.

What does it all mean for us?

And if we’re talking about PGS Software: what does it all mean for IT outsourcing world and for us in particular? Well, the most important thing is that big business wants to spend mostly on complex data solutions and high-tech virtual systems. That’s not something you can code in your garage – a jump only larger and more experienced outsourcing companies can make. Fortunately, we have several development teams that earned their stripes working on large database projects and online business applications. We believe we can offer those high-complexity services. And if, after seeing the survey, you think technology is ripe enough to convince you to update or replace your critical business applications, just give us a call.

In the meantime, we’ll keep an eye on further research. Knowing what people want now is fine, but it would be better to know what will their needs look like in two or three years’ time. As usual, we want to prepare for what’s around the corner of the enterprise IT.

Any clairvoyants with crystal balls looking for hire?

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